What Causes Bad Credit & Can You Get A Mortgage Regardless?

Many people are concerned with their credit score because they are worried that it can provide a barrier to getting a loan, taking out a credit card or gaining the ability to buy a house.

The problem with credit score as a metric to determine whether someone should receive a loan is that a lot of decisions outside of your control might harm your credit score.

This is why we offer mortgages to people with bad credit, as people are more than just a number compiled by three credit reference agencies, each of which has completely different methodologies for calculating their score.

Not every poor credit score is caused by risky financial behaviour, CCJs or not paying bills on time. In fact, there are some reasonable, rational financial behaviours that are penalised by a credit score and could affect eligibility for some mortgages with some providers.

Not Having Enough Debt 

Most people understand that reaching close to your credit limits on credit cards or taking loans close to your accepted limits will have an effect on your credit score, as they imply that you might be struggling with your finances and may not be able to repay.

However, not taking out a credit card or loan commitment can sometimes be just as bad, as it provides as the credit reference agencies do not know how you will act once you start borrowing money. Credit builder cards are often marketed as being specifically a credit card to improve a credit score.

As well as this, only having one type of credit, such as a personal loan or a credit card, can affect your score as lenders will always err on the side of caution when it comes to how someone will behave with access to finance.

Regularly Moving

Credit agencies and lenders want consistency, not only in payments but in the other parts of your life as well. If you have lived at the same address for a very long time, that will often cause your credit score to gradually increase.

This is not only due to the implication that if you are staying in the same place you are presumably making payments towards your rented accommodation.

By contrast, whilst regularly travelling is extremely common for people who change jobs or job sites within a particular role, it is sometimes seen as a reflection of unstable financial arrangements.

Guilt By Association

In certain, specific circumstances, you can do nothing wrong but your credit score can plummet due to being linked with people who have bad credit themselves.

In most cases, this involves a joint account or loan in both of your names, but it can also affect your score if you have agreed to be a guarantor for a loan for someone.

This usually fixes itself once the person pays their debt, but credit rating agencies are mindful that their debt can become your debt if they default.

Checking Eligibility For Finance

There are two types of credit checks. A soft check, such as when you view your credit history online, can be done an unlimited amount of times and will never appear on a credit check.

However, if you apply for a line of credit or a loan, the lender will undertake what is known as a “hard check” which will appear on your credit score. This will only have a minor effect on your score at first, but multiple hard checks can accumulate and suggest that someone is struggling with their finances.

Not Being Registered To Vote

If you are not on the Electoral Roll, then your credit rating can suffer as the electoral register also serves as proof of your address.